This paper investigates the relationship between product market competition and innovation. We find strong evidence of an inverted-U relationship using panel data. We develop a model where competition discourages laggard firms from innovating but encourages neck-and-neck firms to innovate....

A business-cycle model is developed in which output is traded on Lucas-Phelps islands and labo r services on each island are exchanged through costly search and rec ruiting with transactions externalities. The model exhibits persisten t involuntary unemployment and inefficient equilibria, even...

Many economists have argued that the observed increase in wage inequality in developed economies over the past 30 years is due to skill-biased technical progress. In this paper we put forward a somewhat different technology-based argument, namely that the increased inequality was caused by...

We use Schumpeterian growth theory to account for the divergence in per-capita income that has taken place between countries since the mid-19th century, as well as for the convergence that took place amongst the richest countries during the second half of the 20th century. The argument is based...

A model of fiat money is constructed in which spatial separation and the logistics of communication are made explicit as in search theory, but exchange is organized by profit-seeking business enterprises as in all market economies. Firms mitigate search costs by opening shops that are easily...

How does firm entry affect innovation incentives in incumbent firms? Microdata suggest that there is heterogeneity across industries. Specifically, incumbent productivity growth and patenting is positively correlated with lagged greenfield foreign firm entry in technologically advanced...